Iberdrola (0HIT) SWOT Analysis / TOWS Matrix / MBA Resources
Electric Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Iberdrola (United Kingdom)
Based on various researches at Oak Spring University , Iberdrola is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, central banks are concerned over increasing inflation, increasing energy prices, cloud computing is disrupting traditional business models,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Iberdrola can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Iberdrola, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Iberdrola operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Iberdrola can be done for the following purposes –
1. Strategic planning of Iberdrola
2. Improving business portfolio management of Iberdrola
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Iberdrola
Strengths of Iberdrola | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Iberdrola are -
Analytics focus
– Iberdrola is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Electric Utilities industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Strong track record of project management in the Electric Utilities industry
– Iberdrola is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Iberdrola has one of the best training and development program in Utilities industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Iberdrola in the Utilities sector have low bargaining power. Iberdrola has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Iberdrola to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Iberdrola are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Iberdrola has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Iberdrola to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Iberdrola is one of the most innovative firm in Electric Utilities sector.
High switching costs
– The high switching costs that Iberdrola has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Electric Utilities
– Iberdrola is one of the leading players in the Electric Utilities industry in United Kingdom. Over the years it has not only transformed the business landscape in the Electric Utilities industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Iberdrola in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Iberdrola has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Iberdrola staying ahead in the Electric Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Iberdrola is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Iberdrola is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Iberdrola emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Iberdrola is one of the leading players in the Electric Utilities industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Iberdrola | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Iberdrola are -
Skills based hiring in Electric Utilities industry
– The stress on hiring functional specialists at Iberdrola has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at Iberdrola, in the dynamic environment of Electric Utilities industry it has struggled to respond to the nimble upstart competition. Iberdrola has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Electric Utilities industry, Iberdrola needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As Iberdrola is one of the leading players in the Electric Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electric Utilities industry in last five years.
High cash cycle compare to competitors
Iberdrola has a high cash cycle compare to other players in the Electric Utilities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Iberdrola has high operating costs in the Electric Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Iberdrola lucrative customers.
Low market penetration in new markets
– Outside its home market of United Kingdom, Iberdrola needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Iberdrola ‘s star products
– The top 2 products and services of Iberdrola still accounts for major business revenue. This dependence on star products in Electric Utilities industry has resulted into insufficient focus on developing new products, even though Iberdrola has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Iberdrola is just above the Electric Utilities industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Iberdrola is slow explore the new channels of communication. These new channels of communication can help Iberdrola to provide better information regarding Electric Utilities products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Iberdrola products
– To increase the profitability and margins on the products, Iberdrola needs to provide more differentiated products than what it is currently offering in the marketplace.
Iberdrola Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Iberdrola are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Iberdrola is facing challenges because of the dominance of functional experts in the organization. Iberdrola can utilize new technology in the field of Electric Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Iberdrola can use these opportunities to build new business models that can help the communities that Iberdrola operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.
Building a culture of innovation
– managers at Iberdrola can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Electric Utilities industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Iberdrola can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Iberdrola to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Iberdrola to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Iberdrola has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electric Utilities sector. This continuous investment in analytics has enabled Iberdrola to build a competitive advantage using analytics. The analytics driven competitive advantage can help Iberdrola to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Iberdrola can improve the customer journey of consumers in the Electric Utilities industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Iberdrola to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Iberdrola has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Iberdrola can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Iberdrola can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Iberdrola in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electric Utilities industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Iberdrola to increase its market reach. Iberdrola will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Iberdrola External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Iberdrola are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Iberdrola needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.
Environmental challenges
– Iberdrola needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Iberdrola can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.
High dependence on third party suppliers
– Iberdrola high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– Iberdrola needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Electric Utilities industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Iberdrola in the Electric Utilities sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Iberdrola will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Iberdrola in Electric Utilities industry. The Electric Utilities industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Iberdrola
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Iberdrola.
Technology acceleration in Forth Industrial Revolution
– Iberdrola has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Iberdrola needs to keep up with the evolution of technology in the Electric Utilities sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Electric Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Iberdrola can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Iberdrola is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Iberdrola can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Iberdrola prominent markets.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Iberdrola Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Iberdrola needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Iberdrola is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Iberdrola is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Iberdrola to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Iberdrola needs to make to build a sustainable competitive advantage.
